Infrastructure companies going all-in on booming cannabis market

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Shopify Inc. is just one of several infrastructure and support companies to go all-in on the boom in the legal cannabis market. Shopify doubled its bet on cannabis, with the province of British Columbia announcement that the e-commerce company will run the province’s legal online marijuana sales channel and sales from a provincially run warehouse to private retailers.

Expanding companies on the supply side management of cannabis with significant interest in this development include FedEx Corporation (NYSE: FDX), SAP SE (NYSE: SAP) and Shopify Inc., (NYSE: SHOP). These significant well providers are positioned to participate in the booming business of infrastructure support for cannabis.

Junior companies such as TrackLoop Analytics have also been quick to spot the growing trend and offer solutions to this expanding market. TrackLoop Analytics (CSE: TOOL) is providing one of the first fully integrated Supply Chain Management (SCM) platforms for the emerging Cannabis, Food & Pharma logistics industry. Its real-time tracking solutions offer the very latest in IoT and AI, providing valuable data and business intelligence to support the producers facing challenges.

Companies across the delivery, infrastructure and support spectrum have moved into the new market in hopes of gaining dominance in what is now viewed as mainstream business.

Companies excited to jump in

Shopify’s added role follows a similar announcement from the province of Ontario in February, when the Ottawa-based tech company signed an agreement to manage Ontario’s online cannabis sales along with the country’s largest in-store point-of-sale system for provincially-owned stores.

“You’re seeing us win these contracts because we can help them get where they want to go on the timeframes which are very tight and challenging,” said Loren Pendeford, vice-president and general manager of Shopify Plus.

But unlike Ontario, British Columbia has a hybrid, public mixed with private system for cannabis retail sales. The idea is that the majority of brick-and-mortar stores will be privately owned, although the B.C. Liquor Distribution Board (LDB) is regulated to run dispensaries, branded BC Cannabis Stores, in some jurisdictions.

At this point the province is also in the role of a middleman. All legally grown cannabis has to be sold wholesale to the government owned LDB, which resells it to end consumers online or to private retailers.

LDB announced a 6,500-square-meter distribution center in the Vancouver suburb of Richmond that it expects to employ over 130 staff in order to handle logistics, shipping and receiving, customer-care and maintenance departments.

Shopify’s e-commerce system is being integrated into the LDB’s warehouse to manage orders from private retailers and end-consumers, according to the company’s plans.

Locking up contracts with large provincial crown corporations is a major part of Shopify’s and other logistics companies’ strategies in the emerging cannabis industry. But the opportunity is anticipated to go beyond government contracts.

Cannabis dispensaries in the western provinces that allow private retail need point-of-sale and inventory tracking systems, and licensed producers still need systems to run the medical side of the business, where direct-to-consumer sales are allowed.

The whole enchilada: logistics and supply chain management

Beyond software and retail point-pf-sale, the cannabis sector has an almost shocking reliance upon paper or non-universal barcoded recording, which lacks traceability and proper control along the supply chain. An estimated 65% of cannabis operators are still using outdated logistics strategies.

With the explosive emergence of new legal cannabis markets, there is a major demand for regulated real-time traceability in cannabis supply chain, the same as supply chains for food and bio-pharma.

TrackLoop Analytics is a provider offering superior solutions for this important segment of the business. The company is providing real-time solutions for the food, pharma, and cannabis industries. It is the only end-to-end integrated API, with up to 70% reduction in integration cost and lowest operational down-time.

This is clearly a segment where innovators such as TrackLoop are in dire need. Many current options for enterprise resource planning (ERP) and internet of things (IoT) multi-platform integration make real-time tracking difficult and highly expensive—reaching up to a $500,000 multi-year increment cost.

TrackLoop is already moving beyond the boundaries of its Canadian base and has begun U.S. markets entry with a substantial launch in California’s lucrative pot market. In all, TrackLoop’s system is fully integrated and compliant with Metrc, the regulatory and compliance system deployed in California, Colorado, Ohio, Alaska, D.C., Oregon, Nevada, Maryland, Michigan and Montana.

Getting a piece of the big pie

The size of the legal recreational market in B.C. and other western Canadian provinces is massive and can hardly keep pace with current demand. A recent report by Deloitte, suggested legal recreational sales in Western Canada could range from $570 million to $1.37 billion. This is fertile ground to launch an emerging logistics provider.

Among the competitive landscape of its peers, TrackLoop stands out for its ability to provide real-time mapping, low-cost setup and operation, IoT-powered, Blockchain-driven, predictive maintenance (AI), cold chain solutions, with hardware capability, and the lowest integration times.

Companies with the ability to form early dominance in their segment of supply chain management, distribution and product fulfillment in the cannabis industry include:

FedEx Corporation (NYSE: FDX) provides transportation, e-commerce, and business services worldwide. The company's FedEx Express segment offers shipping services for delivery of packages and freight. Its FedEx Ground segment provides business and residential money-back guaranteed ground package delivery services; and consolidates and delivers low-weight and less time-sensitive business-to-consumer packages. The company's FedEx Freight segment offers less-than-truckload and freight delivery services.

SAP SE (NYSE: SAP) is the largest provider of enterprise application software and software-related services worldwide. Its Applications, Technology & Services segment derives its revenue primarily from the sale of software licenses, subscriptions to cloud applications, and related services, which mainly support various professional and premium services, as well as implementation of software products and education services.

Shopify Inc. (NYSE: SHOP) provides a cloud-based multi-channel commerce platform for small and medium-sized businesses in Canada, the United States, the United Kingdom, Australia, and internationally. Its platform provides merchants with a single view of business and customers in various sales channels, including Web and mobile storefronts, physical retail locations, social media storefronts, and marketplaces; and enables to manage products and inventory, process orders and payments, ship orders, build customer relationships, leverage analytics and reporting, and access financing.

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